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Obama: Nationalization of GM to be short-term

(Agencies)
Updated: 2009-06-02 15:05

WASHINGTON -- US President Barack Obama ushered General Motors Corp. into bankruptcy protection Monday and put the government behind the wheel of the company that once symbolized American economic muscle.

The fallen giant, the largest US industrial company ever to enter bankruptcy, is shedding some 21,000 jobs and 2,600 dealers. Sparing few communities, the retrenchment amounts to one-third of its US work force and 40 percent of its dealerships.

An American flag flies in front of the General Motors, Global Headquarters in Detroit, Michigan, Monday, June 1, 2009. [Agencies]

"We are acting as reluctant shareholders because that is the only way to help GM succeed," Obama said of the temporary nationalization of the 100-year-old company.

Obama lauded what he called a "viable, achievable plan that will give this iconic American company a chance to rise again" as GM followed Chrysler LLC into bankruptcy court. Of Detroit's "Big Three" automakers, only Ford Motor Corp. has avoided bankruptcy restructuring and has not taken federal bailout money.

The prepackaged GM bankruptcy deal -- crafted by the administration, the company, the United Auto Workers union and a group of bondholders -- would give the US government a 60 percent controlling stake in what was once the world's largest automaker. An additional 12.5 percent would be under Canadian government ownership.

"What I have no interest in doing is running GM," Obama said. His only goal, he said, was to get GM back on its feet and then "to get out quickly."

Yet, the US could end up holding the shares for some time.

Neither Obama nor his spokesman offered an indication of how long the government's involvement with GM would last. "I don't know that there is a timeline," said Robert Gibbs, the White House press secretary.

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"He has a strong obligation to ensure that there is a management structure in place that is making smart business decisions," Gibbs said. "Is the president going to thumb through engineering reports and each page of the annual report? No."

Steve Rattner, head of the president's auto task force, later told reporters: "We don't have a specific timetable, we don't have a specific deadline."

"The outcomes are driven heavily by things that are outside our control, particularly market conditions, car sales, overall economy and obviously the performance of this company," Rattner said. He said the government would retain the right to vote its share on major matters such as mergers or acquisitions but that day-to-day operations "are all going to be left to management."

With the US on track to be GM's new owner, the road ahead for the troubled automaker was an uncertain one -- with a heavy potential for conflicts and many risks for taxpayers.

"The agreement may buy some time, but does nothing to ensure GM's success," said House Republican Leader John Boehner of Ohio. "The only thing it makes clear is that the government is firmly in the business of running companies using taxpayer dollars."

Longtime consumer advocate Ralph Nader, an early critic of General Motors, said on CNBC that the new arrangement may give GM a clean slate, but it also could become "a political boomerang for President Obama."

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